Sizing Up Intel’s Mobile Business After Executive Departs

March 30th, 2011 by Trefis Team
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A senior executive at Intel (NASDAQ:INTC) who headed its push into smartphones and tablets recently resigned from the company. We take this opportunity to briefly look at how much this business contributes to Intel and whether or not the company’s problems still persists. Intel competes with Advanced Micro Devices (NYSE:AMD) and Nvidia (NASDAQ:NVDA) in the PC microprocessor and graphics businesses. Our price estimate for Intel stands at $27.23 which is around a 30% premium to the market price.

Intel’s Disappointing Performance in Mobile Devices

A recent Wall Street Journal article states:

Anand Chandrasekher has been the face of Intel’s ambitions in pocket-sized devices, which haven’t produced much in the way of results yet. But no more.

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Mr. Chandrasekher was a senior vice president of Intel’s ultra mobility group that is focused on chip development for mobile devices. While Intel has been dominant in desktops and notebooks with its x86 chip, it has lagged in the smartphone space. This market is largely dominated by ARM-based processors and Intel’s Atom has been a late entrant and unable to match ARM’s efficiency so far. This is one of the prime reasons why ultra-mobile processors and Atom together constitute just around 4% to Intel’s value by our estimates.

While Intel’s small presence is an obvious reason behind the low contribution of these segments, another reason is the lower revenue opportunities in given the lower price of Atom processors vs. Intel’s estimated desktop or notebook microprocessor prices. Additionally, average Atom pricing is likely to decline given that Intel will need to be competitive on price points to make space for itself in ARM-dominated market.

While Intel has struggled in this space, we still believe that Intel has plenty of tailwind in its core products to justify an over $27 stock value. We also note that AMD’s former CEO was removed by its board due to its dissatisfaction with AMD’s performance in mobile space, which draws some parallels to Chandrasekher’s departure as several firms have struggled to seize the smartphone opportunity.

You can see the complete $27.23 Trefis price estimate for Intel’s stock here.